Hint Points To People's As Failed NewAlliance Suitor

Major Job Losses And Branch Closings Due To Overlap Would Have Accompanied That Marriage

November 09, 2010|By KENNETH R. GOSSELIN, kgosselin@courant.com

Before NewAlliance Bank agreed to sell itself to First Niagara Bank, it had discussions with another suitor, according to federal filings that barely hint at the identity of the unnamed, would-be acquirer.

It appears that People's United Bank may have been that mystery suitor.

If such as merger had taken place, job losses would have been deep and branch closings extensive, given the heavily overlapping markets of the two banks. The outcome could have been far worse for the community than the loss of local control over loan-making decisions that are now being raised by the NewAlliance-First Niagara deal.

Buffalo, N.Y.-based First Niagara, with no operations here, plans to keep NewAlliance's New Haven headquarters as a "regional hub." That almost certainly wouldn't have been the case with Bridgeport-based People's United, whose headquarters is just 30 miles to the south.

People's United, one of Connecticut's largest banks, certainly had the means to buy NewAlliance: more than $2 billion burning a hole in its pocket — money it has available to buy competitors for its oft-stated goal of building a larger bank.

And People's United fits the one hint contained in the federal filing by NewAlliance. On April 27, NewAlliance Chief Executive Peyton R. Patterson reported to the bank's board that an "unexpected" management change at the potential unnamed acquirer might take it out of the running.

Just one day before, People's United had announced the surprise firing of its chief executive, Philip R. Sherringham. The reason, according to analysts: Sherringham had failed to pull off a major acquisition.

While analysts said Tuesday they did not have firsthand knowledge of any talks, some said a combination of People's and NewAlliance would have made sense financially — though it would have been a tough sell in the community and politically, considering all the likely job losses and branch closings.

"The idea that People's and NewAlliance would be talking, that's certainly not out of the question," said Matthew Kelley, an analyst at Sterne Agee in Portland, Maine. "Given the overlap of the two franchises and opportunities to extract cost savings, it would have been a deal with a lot of financial merit."

People's United and NewAlliance both declined to comment and Sherringham could not be reached.

The filing, a proxy being mailed to NewAlliance shareholders in advance of the Dec. 20 merger vote, outlines the unfolding of the deal, announced in August, under which First Niagara plans to buy NewAlliance for $1.5 billion.

The unnamed acquirer first approached NewAlliance in December and then again in February, the filing shows. NewAlliance held talks with First Niagara Chief Executive John R. Koelmel as well as the unnamed suitor.

But uncertainty was raised at NewAlliance's board meeting on April 27.

According to the filing, it was noted that "due to an unexpected development with respect to the management of the other potential acquirer, it was unclear whether and over what time frame further discussions regarding a transaction could take place."

Sherringham's firing had been widely reported.

Patterson met with the chairman of the unnamed potentional acquirer on May 4, which was followed by a telephone call, according to the proxy.

"Ms. Patterson reported to the NewAlliance board that the other potential acquirer had indicated they were not prepared to pursue their interest in the short-term," the filing said.